When a relief from the automatic stay is filed, it is done by a creditor. The creditor is asking the court to remove the automatic stay protection issued in bankruptcy so that they can continue collection efforts. Typically, the creditor does so when they need to repossess a car or foreclose on a home, but they are barred while the automatic stay protection is in place.
If you are in the middle of bankruptcy and the creditor has filed this, do not ignore it. Instead, meet with a bankruptcy attorney as soon as possible. Ignoring these could result in the court granting the relief, which means you could lose your home or vehicle.
When Would a Creditor File for a Relief from Automatic Stay?
Creditors typically make a motion for relief against an automatic stay once you, the debtor, files for Chapter 7 or Chapter 13 bankruptcy. If you do not want to keep your car or home or have no intention of repaying those loans to make them current as part of your bankruptcy, then the creditor might file for relief in order to continue collections rather than wait for the court to decide later on.
In the petition for bankruptcy, the creditors will receive information that may prompt them to file for relief, because the petition will state:
- What property you currently hold with secured loans against it (e.g., mortgages or car loans);
- Which property you plan to keep and which property you will continue paying for; and
- Which property you plan to surrender as part of the bankruptcy proceeding.
Any property that you list as the one you are willing to surrender will most likely receive a complaint for relief from the creditor on that property. For example, if you say that you are going to surrender a vehicle, the loan company for your car will request relief so that they may repossess the car.
What Action Should a Consumer Take?
If you receive a request for relief from the automatic stay, you will first need to decide if you really plan to keep that property or if you’re willing to surrender it to the creditor.
When You Want to Keep the Property
If you want to keep the property and it has a secured loan, then you must continue making payments, even during bankruptcy. Furthermore, you must create a plan to repay any back-owed payments on the loan so that it is current.
When you continue making payments, the creditor cannot file a motion for relief from the automatic stay. Even if they did, the court would not issue a relief because you are showing your good intentions for staying current on that loan.
If, however, you are behind on the payments and you still want to keep it, then you need your attorney to step in. Your attorney can argue on your behalf, work out a payment arrangement, and prevent the creditor from foreclosing or repossessing on that item.
When You Don’t Want to Keep the Property, and You’re Willing to Surrender
If you do not want to pay on the property, and you have no intentions of making up payments to keep it, then you are opting to surrender that property. You can let your attorney know that you wish to surrender it. Then, your attorney will let the court know you do not contest the motion for relief, and the creditor will receive their court-ordered relief.
For vehicles, the lender can repossess the car the same day the motion is granted. For houses, however, you still have the six-week notification before the sale, and you will also have a six-month redemption period after the sale.
What if I’m Current and the Creditor Files a Motion for Relief?
A creditor cannot file a motion for relief when you are current on your loan. If they do, your attorney will show your current payments and the motion will be denied. Sometimes, creditors can file a motion by accident, which is why it is important to have documented records showing payments, that the payments are on time, and that you are current on your balance due.
Why Do Creditors Use Relief Requests?
Instead of waiting for bankruptcy to complete, which could take several months, creditors will file for relief so that they can repossess the property immediately. Usually, a creditor will not file for a motion for relief with Chapter 7. Instead, they will wait for the three-month period and then foreclose or repossess once your case is over and debts have been discharged.
Creditors delay because they would rather wait than pay attorney’s fees to file for the motion for relief, since they would still get their property back, regardless, in two months. Also, the property is not going to depreciate that heavily in a two or even four-month period, so the creditor knows it is better to wait than pay for court fees and lawyer costs just to get the property sooner.
Did You Receive a Notification about a Creditor Requesting Relief? Contact an Attorney
If you are filing for bankruptcy and a creditor has filed a motion requesting relief from the automatic stay (but you are current on the loan or you want to keep that property), then you need to speak with an attorney right away. A bankruptcy attorney can then contest the relief request and argue your case in court.
If you want to keep the property, just be prepared to make payment arrangements and show the court you are serious about keeping the loan current. When you have numerous missed payments, or you don’t have the financial means to repay what is past due, the court might grant the relief regardless.
The team at Hames, Anderson, Whitlow & O’Leary understand how confusing bankruptcy can be, which is why our attorneys want to help you when you are trying to file for Chapter 7 or Chapter 13 bankruptcy.
Meet with us today for a confidential consultation by calling our office or requesting more information online.